A Few Creative Ways to Make Money

I am always looking out for creative ways to make money to report on for my websites. I recently found a fun one in a great little true story, written by a man who had certain survival talents and decided to demonstrate them. He was dumped in the middle of a large city with no money on him. Soon he had a nice hotel room and some cash. The things he did deserve the warning, “Don’t try this at home,” but they’re good examples of the possible.

He first went to the drive-through windows of a few fast food restaurants to collect the change that inevitably drops on the ground as it is passed from cars to cashiers or vice-versa. When he had a dollar in various coins, he went to a store and exchanged it for four quarters. With those he bought a newspaper from a coin-operated paper box, but when it was open he took all sixteen papers. I should note that he claims to have repaid the newspaper company in full after this experiment in survival.

Hawking them on the street, he sold the sixteen papers at full retail of a dollar per copy. He then took his sixteen dollars to a bar he already had in mind and ordered the cheapest beer available, and started a conversation with the bartender. After his first beer he made what is commonly called a “bar bet” with him for the next drink. Although I don’t remember which trick he used, there are many that can be learned from various books. You can make a nickel go through a hole in a piece of paper the size of a dime, for example, without tearing the paper, and there are the usual card tricks that can be learned with a bit of practice.

He won the bet, got his next beer and then got a few of the other people in the bar interested in his tricks (he knew a lot of bar bets). After a ten dollar bet or two, which he naturally won, he found other “targets” who were willing to bet even higher amounts. That evening he had enough to pay for a nice hotel and still had $5 or so in his wallet.

Some Other Creative Ways to Make Money

Perhaps you heard about the man who turned a paper clip into a house. This was a few years ago. The paper clip was apparently large and colorful, and he traded it for an antique door knob. He traded that for something else, and so on, doing a little better on each exchange. A year later he had traded up to a house, which was his goal. He meant to use it as his home, but he certainly could have sold it, making this a very creative way to make money. Here are some others.

A co-worker of mine, years ago, cut cows out of plywood, painted them and sold them from his front awn.

When I was having trouble selling an ebook I decided to give it away by email a chapter at a time, making money off the ads on the website pages where the chapters were hosted. I made four times as much income from the book doing this.

A pet detective recently started using trained tracking hounds to locate lost pets for people.

In Boulder Colorado we watched a man who juggled burning bowling ins and other things while riding a unicycle downtown. The collection he took from the audience looked to be about $50 after his twenty-minute performance.

A recent news item reported on people who are getting old clothing from thrift stores for a dollar or so per item and selling them on Ebay for up to $40. They use dyes, sequins and more to “dress them up” into something interesting.

I know of a man who discovered that he can sell old books by adding his own commentary or other content and converting them into Kindle downloads (a type of e-book). He works with books that no longer have a copyright, and sells them cheap, getting 35% of each sale made. Anyone can become an author or publisher for free in Amazon’s Kindle program.

I could list many other creative ways to make money off the top of my head, and then there are all the ones I haven’t heard of, so why not choose one or invent your own and start having fun?

What Is the Purpose of a Job – Part Two

Continued from What is the Purpose of a Job?

You can also choose to use whatever you learn to make money in other ways. Many years ago I used to clean carpets for $8 per hour. Using what I learned and a bit of research I put together a website on carpet stains six years ago. With minimal upkeep each year, it has made me far more than I ever made pushing that high-pressure wand.

Networking

An important part of what we call luck is knowing the right people. If there are places of employment where you are more likely to meet the “right” people for your goals, it makes sense to identify these jobs and go after them. For example, working in a country club might lead to meeting potential investors for your future tech company. If you want to make contacts in Hollywood in order to sell your script you might wait tables where directors and producers eat. Do your research of course.

Of course if you plan to start a business, working in the relevant industry is almost always a good way to meet the right people. Just be sure you make a point to meet them. If you have a job delivering cleaning supplies to restaurants, for example, and you hope to start a similar business, don’t just drop off the deliveries. Say hello to the managers, learn their names, ask them if there is anything else they might need delivered, and make sure they know your name. In other words, consciously use you job for networking.

Personal Development

Working can teach you a lot about yourself. You might think you’re a highly motivated worker, for example, but then discover that when you have a sales position you lose much of that motivation. In other words, a job can teach you what you are good at and what you are not so good at. Beyond this revealing of your natural gifts and interests, a job can help you develop abilities you didn’t know you had. You might have to learn to talk to people if you work as a taxi driver, for example.

There is a more personal side to this as well. When I was young I had a job in restaurant management, and I discovered–much to my dismay–that I was often a mean person. Worse descriptions were used by some of those who worked under me, and they were not entirely untrue. That experience motivated me to change (I hope). Working with others can be a chance to learn and grow.

The Many Purposes of a Job

My first real tax-paying job was as a dishwasher and cook at age 17. I had a very specific plan when I applied for it. My goal was to save up enough money to hitchhike to Mexico for a month or two. After working half of that winter I quit and I was soon out on the highways with my thumb out and a wad of cash in my pocket. The purpose of a job? To make travel possible–or for any other important goals.

Yes, perhaps sometimes it is just for a paycheck. When this is true, treat it as a temporary condition. Look for others ways to use that position or look for other employment that can be used for higher purposes. I have never truly liked any job I’ve had–that’s just the way it is. But using them for a greater goal made them tolerable. On the other hand, working a job just to pay the bills would have been terribly depressing.

What is the Purpose of a Job?

For far too many people the purpose of a job is to get a regular paycheck and nothing more. Of course there is nothing wrong with income, and this is one reason to look for employment. But it is possible to have a different perspective on paid work–one that leads to bigger achievements, including a happier life.

A way to pay the bills is a start. But what other purposes can we think of if we use a job as a step toward greater goals? Here are some possibilities…

  •  A business training course.
  • A way to build capital.
  • An education.
  • A way to meet the right people.
  • A personal development course.

There are certainly other things you can use a job for, but for now let’s take a look at the five items on this list.

Business Training

Most jobs provide valuable training for a future business if you choose to use them that way. This is obvious when we look at roofing companies or beauty salons, where the owners most often started out as employees of similar businesses. In fact, many if not most businesses are owned by those who started in the industry with a job. If you are a dishwasher in a restaurant, for example, and you pay attention, you might advance to management within a couple years and in the process learn what you need to know to start your own successful restaurant.

If this is your purpose, choose to use your employment wisely. Ask questions constantly and take notes. Create a clear plan for your training, with a list of what you will need to know, the skills you will need to develop, and the capital requirements for your future business. That brings us to the next purpose of a job…

Capital Source

The second item on our list often works hand-in-hand with the first. You will need capital to start that restaurant or roofing company, after all. That can be had in part or full by putting aside a part of each paycheck. Self discipline is crucial here. It is easy to put off saving money and so get stuck in a job for much longer than you planned.

If the goal is startup capital, make the tough decisions necessary. For example, I chose to pay cheap rent to live with my parents while working one of my first jobs. That made it possible–even at minimum wage–to save up a down payment for a home that later became a profitable boarding house. Unless you truly love your job, you should make the necessary sacrifices so that it can get you where you want to be sooner.

If you already have the necessary skills and knowledge to start a given business, you may not need to work in that industry. In that case it might make sense to simply look for the highest-paying employment available. That way you can put together your startup capital as quickly as possible.

Education

Apart from educating you about the industry you are working in, a job can also give you the knowledge you need for other purposes. For example, you might choose to work as a real estate agent to learn what you need to know to profitably invest in houses or commercial properties. You could choose to be a secretary in a publishing company just to get an education about the business–in order to later get your books published. You might even work just to enjoy learning new things.

Continues here… Purpose of a Job – Part Two

Is There a Gender Wage Gap?

Is there still a large gender wage gap? Not all of the number crunching from the 2010 census has been done yet, but when we look at the data collected in the census of 2000, we find that–as an example–in Alabama, men who work full time under the title of “chief executives” make $82,462 annually, while women in that category make just $46,650. The averages for the country as a whole are $95,982 and $61,134. If we do some number crunching we see that women who are chief executives in Alabama make 46% less than men in that position. That compares to the national average of 36% less for women.

That is definitely a gender wage gap, in Alabama and in the country. But what is the cause? Some will tell you that it’s because women take time off to have children, and so their wages are lower by choice. Of course the question here is; 46% lower?

When you get to the less-skilled jobs the gender wage gap gets narrower. For example, the data shows that women in the U.S. who are postal service clerks average $38,608, which is only 5% less than men in that position. Of course this brings up the question of why they would lose only 5% of wages for “voluntary” reasons like having a child, while chief executives do 46% worse than their male counterparts.

Then there is the more obscure data to be mined in these statistics that the U.S. Census Bureau compiles. For example, of the men in the category of “chief executive” 58% have college degrees, while only 44% of women in this position have these papers. It is interesting to note how many of both sexes have attained such a position without college degrees (probably those who started the companies in most cases), but it also brings up the question of how much of the gender gap is really an education gap.

Now I offer some speculation and commentary.

Most of us can honestly say that we just don’t see any company that openly pays 46% less or $36% less or even 5% less to a woman than a man for the exact same job. Generally the starting pay, if specified in any way, is the same. And I’m willing to bet that not only will most who make these decisions claim no bias, but will believe what they say. Perhaps I am optimistic, but I think we have reached the point where 90% or more of us would want to pay the same for the same job regardless of gender or race or anything other than performance.

But now the realistic part of me: People are acting on subconscious motives all the time, and there is a large degree of prejudice in all of us–just in different directions. This suggests that even the most consciously honest person can discriminate without being aware of the basis or the reality of that discrimination. I suspect that this is the reason for much of the gender wage gap. The research backs me up, by the way, with many studies showing biases that we are not aware of. And if a woman is promoted less often, then the men in those higher positions will go through more cycles of raises and bonuses. They will have more income for true service and experience–but service and experience that has been denied to qualified women.

We will perhaps have a gender wage gap for generations due to cultural expectations that motivate many women to take a different course than men. But beyond the “fair” reasons for the gap, there are the unfair and unconscious forces that we will have to deal with individually and as a society over time.

Adjusting to Our Falling Income

As you might expect, it was much more fun when our income was rising. My wife and I started to make a living online about eleven months after starting our business, and the revenue just kept going up year after year. At some point we were making 600% of what I made at my best job in the past. But now we are dealing with a falling income. In fact, it has been dropping for two years now, and is off about 75% from the top. For those math wizzes among you, that still leaves us with more than that best job used to pay, for which we are grateful. But then it continues to go down, despite the addition of jobs (something we haven’t needed in the last eight years), and many efforts to revive the business.

Why our internet-based revenue is down is another story, one that is probably not interesting to those who are not doing business online. It has to do with large players taking over the industry, the impossibility of figuring out what a computer algorithm at Google values in in search results (it is not just quality information), and my lack of marketing skills. In any case, it was fun while it lasted, and still almost pays the bills. But this piece is being written as a warning to others and a look at what it means to live through ups and downs in income.

The warning I offer is this; do not assume that your income will continue to rise or even stay the same, and be prepared for it to go down.

We were prepared, at least in the basic financial ways. We had (and have) no debt. We had even paid off our mortgage loan early on our home in Colorado. That helps when the monthly profits (or paychecks) start to get smaller. We had saved some money as well, so we were ready for the transition of moving to Florida, where there were more job and business opportunities (and warmer winters). It always helps to have some flexibility, and money in the bank provides that.

The psychological adjustment to a falling income is perhaps the greater challenge. We were fortunate that we never did live up to our previous income. Eventually we did get used to the idea that we could eat out whenever we wanted and buy routine things without concern for getting the best deal. We did spend quite a bit traveling and eating out. But we still cut our napkins in half at home, and shopped sales to save money. Frugal habits die hard, and that’s a good thing.

But despite never being extravagant when times were good financially, we did get used to the ease of making decisions. Tooth is hurting? Go to the dentist tomorrow. Hungry and five miles from home? Stop for a meal. Hear about a good book? Make a few clicks online and buy it. A family member needs some help? No problem.

That ease is gone to a large extent. Now we once again have to consider carefully how old the next car we buy will be, whether to buy oranges or apples, and whether or how we can afford to go to Key West for a weekend or an overnighter (we’ll use our Hyatt credit card points for a free night, and eat snacks in the hotel room for at least one meal).

In some ways it is a pleasant challenge to have to think about and figure out how to afford things. Maybe that’s just our personalities; it never bothered us to tear the napkins in half, and it was fun to use buy-one-get-one-free meal coupons for restaurants. But at the same time it can be nerve-racking to hear a new sound in the car and wonder if there is a $500 repair coming soon, or to have the dentist hand us a paper outlining a $9,000 plan for proper care (fortunately he was wrong according to the other dentists we consulted). It isn’t nice to have to think twice about donating to a favorite charity. All things considered it is better to have more money rather than less, at least up to a point (and I’m not sure where that point would be).

Lessons of the Fall

It Can Happen to You – There are perhaps more possible jobs, businesses and investments than ever before, but uncertainty seems to be greater as well. Businesses can fail for reasons outside of your control, and jobs are all temporary now. Be aware of the possibility of a drop in income and be prepared.

Eliminate Debt – It would be so much more stressful to face our declining income if we had a heavy debt load. Even when we were upper-middle-class we bought a three-year old car for cash rather than spend a few thousand more for a new one that would require a loan.

Develop Frugal Habits – If you see it as a game or challenge, it is enjoyable to discover and implement cost-saving measures. Going to a used furniture store to buy a table is like going on a treasure hunt. Those habits will make life much easier if you happen to lose a job or if your business falters.

Keep Fixed Expenses Under Control – We traveled and ate out at restaurants quite a bit, but these are activities that can be reduced or eliminated at a moment’s notice. We would have been in trouble if we had a large house to maintain or big car payments or other large expenses that would have been hard to get rid of quickly. Enjoy life without locking in high regular expenses any more than is necessary.

Learn to Have Inexpensive Fun – It can be a nice challenge to look for cheap entertainment. We’ve found ways to see free movies, get free meals, free museum admission and so on, all here in Naples, Florida, which is known for being the home of the rich. In fact, I suspect we have seen as many movies and eaten out more here than we did in the past. We are having a good time in our new home, and without spending too much. On my personal blog post about living cheap in Naples you can read about the $10 six-hour ocean cruise we took, with unlimited gourmet food included. It can be very stressful to lose most of one’s income, but finding ways to enjoy life on a budget helps keep it from getting depressing.

Plan Ahead – If you suspect an income drop is coming, don’t wait until it arrives to start planning. Start looking for ways to cut costs, and ways to generate more income. We moved before the last 50% drop in income, and we have since found three jobs and bought and sold a condo at a profit because the opportunities are here (much more so than in the sleepy town in Colorado we came from). Our additional income has almost offset the continued drop in business revenue, but only because we took action quickly enough.

Downsize if Necessary – We sold our house in Colorado and bought a cheaper condo here. Normally you’ll want to look for a place that will lower your monthly costs. Our monthly housing cost is higher now because of the association dues (and houses are just too expensive here compared to condos), but that’s the price of living where there are more opportunities. However, we did free up some capital for investing in a new business or a rental property.

Do What You Have to Do – I don’t particularly like having a job, but I did not want to wait until we started eating up our savings before getting busy bringing more money in. I have worked at construction cleanup and even stood by the road holding up signs in recent months, and now work as a driver of an electric tram or shuttle that ferries people from their condos to the beach at a high-end private community. The work isn’t bad, and it is seasonal, leaving time for investing in real estate or staring a business. Meanwhile, the income, along with our other sources, keeps us from eating into our capital. That capital, and the people I meet, provide for the possibility of someday rebuilding our falling income.

Be Proactive – This is the summary of and most important point about the lessons outlined above. You can’t be too passive about what’s happening if you want to survive and thrive. Take action, and do so before you are in serious trouble.

Beliefs About Money

I occasionally write on beliefs about money in my various newsletters and on my websites. It is fascinating to me how many things are believed, both consciously and unconsciously, about money and financial matters, and yet how rarely these beliefs are examined. Today I want to look at limiting beliefs that keep people from succeeding. We can see that there are many ways to succeed financially, and many of those ways are not that difficult to teach. But that isn’t enough in many cases, and the problem is often in the things we think about money and making a profit.

For example, some people feel or believe on some deep level that money is “dirty” or “immoral,” even if they don’t express that thought consciously. If you suspect that unconscious feelings and beliefs like this may be holding you back, you may need to change your mind. Let’s start the process of change with the following explanation. Hopefully it will create a new perspective for you.

How Is Wealth Created?

People often misunderstand how money or wealth is created. You can see this in the belief that wealth is limited, as expressed in the saying “a piece of the pie.” But in reality wealth is not necessarily like a pie to be divided up, and it is very important to understand this.

If the wealth of the world was like a pie, if it was a set amount, then of course everything you gained would be at the expense of others. A pie can only be split so many ways after all. And it certainly wouldn’t be a very nice feeling to get a bigger piece if it meant that an equal share of suffering fell onto others. The guilt that this idea causes may get in the way of many people’s success. There are also many horrible public policies that result from this pie metaphor, because it’s based on an ignorance of basic economics.

Now for the good news: This idea is mostly false (almost no idea can be expressed in a way that is 100% true or false). Wealth is not a static quantity of goods or money. It is something forever imagined and re-imagined in the mind of man and then created in the world.

The average poor person in America today has flush toilets, hot water in the shower, and often a car. These are things which were unknown to the wealthiest individuals of centuries past. This is not meant as an argument against the reality of poverty, but as a reminder that things have gotten better. In fact, there is no unresolvable problem that prevents the whole planet from someday being wealthy. Poverty rates have already been declining for generations now, and it is entirely possible that someday poverty will not exist. Muhammad Yunus, the founder of Grameen Bank – which has lent billions of dollars to millions of poor people to help them develop businesses – agrees with this idea. He has suggested that there will come a time (possibly in this century) when extreme poverty will be something we see only in museum exhibits.

Obviously there is more wealth now than in the past. Let’s take a closer look at how that happens.

Suppose a potato farmer learns how to produce twice as many potatoes in the same amount of time and with the same land, using new techniques or machinery. Suddenly there is more wealth in the world, and it wasn’t at anyone’s expense. If another person creates art, the potato farmer now has more potatoes to trade for it, or to sell to make money to buy that art. Both men are now richer. If a house cleaner buys tools and chemicals that make him more efficient, he makes more money for his time when he cleans the home of the wealthy potato farmer. He, the farmer, and the makers of the tools and chemicals are all wealthier as a result. This is the essence of wealth creation and distribution.

Wealth is created. When you understand the value that you help create, you will feel better about it, and the result will be a change in thinking that changes your future. Even in areas that seem to be zero-sum games, like buying and selling a house for a profit, you are often creating value: You are helping a seller and a buyer get what they want.

As long as you do not use force or fraud to get what you want in life, you generally have to create value to become wealthy. If there is no value created, no person has a reason (nor an obligation) to give you money or other good things in exchange. By definition then, if you conduct yourself honestly, and you get rich, you have created great value in the world. Start with that as the basis of what you believe about money.

More Beliefs About Money

Here are three questionable beliefs or feelings about money that are fairly common. I also have included an alternate perspective you might replace each one with.

Money Is Bad – It can be used for evil or good. Focus on examples of the latter to change your perspective. Oh, and the Bible says “The love of money is the root of all evil.” Putting money ahead of one’s spiritual salvation is the issue. Regardless of faith, you can see that there are things more important than money. That’s a good reason to make some; to help us with our higher values. Here is a better belief: Money Is a Powerful Tool and I Choose How to Use It

Money Is Scarce – A pervasive and useless idea, as discussed above. Wealth is created, and as more real things are created, more money is printed to represent these things. Money is more abundant now than ever before, because there are more ideas than ever, which has lead to an abundance of creation of all sorts. Look around and you will see that there is no scarcity of money. Here is a better belief: Money Is Abundant

Business Is Dirty – Some see business as taking advantage of people, and many particular businesses do act in unethical ways. But this does not mean that doing business is itself unethical. Fortunately, when businesses do cheat employees or customers they often suffer the consequences. Consider the salesman who is “so good he could sell ice in the arctic.” No matter how persuasive, he will probably sell that ice just once, and then suffer the consequences of not properly serving others.

Business serves people, and profit is the reward for doing it well. When a company doesn’t properly serve consumers, it usually fails unless governments exclude competition or require people to purchase their products and services. To succeed, a business serves customer’s interests as defined by the dollars those customers choose to spend. Even when done only for profit a free and fair market forces companies to think of how to best serve others. If one company does not offer what people want, after all, people do not have to buy their products, and another company will very likely find a way to serve those potential customers in order to make money from them.

Business should be all about honesty. As it is, not all players are honest, but we often learn about the dishonest ones when their companies dramatically fail. But in general honesty is very good for bringing customers back again and again. In other words it is profitable to treat customers well, as good business people know.

The products and services we value, from medicine to wonderful music to paper and food , are provided by businesses. Business people had to use their minds, money and resources to figure a way to provide what we need, and all that is asked for this service is a price we are willing to pay. Yes, willing, because if not, we wouldn’t pay it, right? So when you think of business, try to see it as the noble pursuit it often is and always can be. Here’s a better belief: Business Can and Should Serve People.

A Powerful and Ethical Money Making Idea

The following is a simple money making concept that is potentially powerful and is also a good example of how we can create value in many different ways. This is not a new idea, but once you understand it you can find all sorts of new ways to apply it. The idea is the basis for rent-to-own furniture stores, payment plans for engagement rings, and easy-financing at used car lots. It is simply this: add value by making it easier for the customer to buy, and you can sell more at a higher price. I’ll explain it further with a real estate example, because I have had some experience in this area.

I used the technique when I bought my first piece of real estate. Using money saved from a $3.40-per-hour job, I paid $3,500 for a couple acres along a dirt road through a forest, and spent several hours cleaning it up. I put up a hand-made sign and sold it for $4,750 two weeks later. But it wasn’t the cleaning up and outlining of a driveway that sold it as much as the terms: $250 down, $100 per month at 11% interest.

There are a lot of people who do not save money. This makes it difficult for them to make large purchases that either require cash for the full price or a large down payment. I know investors who did something similar to this with houses, paying cash and selling with a low down payment and easy terms. I later bought a small rental home for $19,000 and sold it months later (with no agent and probably only $400 in closing costs) for $22,000 with $1,000 down and payments of $300 monthly at 9% interest. I made thousands of dollars in interest over the coming years.

Notice how this is different from other money making schemes in real estate. It isn’t necessary to buy very far (if at all) below market value. It also doesn’t require fixing up a place, which also adds real value, and might be part of the plan, but is also more complicated. The value you add is in making the property easy to buy.

The woman who bought that first lot I sold still owned it years later when it was worth closer to $15,000, so she probably doesn’t mind having paid more than the cash value originally. The man who bought the rental from me kept it rented through the years, and makes even more cash flow now that it is paid off, so he can’t complain. And, if it is their best option available, potential home owners would certainly be happy to buy from investors on payments rather than paying rent, even if they do pay a bit more than those who can get a traditional mortgage loan.

An Ethical Money Making Idea?

If real value is created and people are helped, it is perfectly ethical to make a profit. On the other hand, I think it passes beyond helping and becomes exploitation of people’s ignorance in the case of many (but certainly not all) rent-to-own sales. For example, many years ago a friend was renting a bunk bed and dresser for her children for $20 per week, and I calculated that she would have to pay almost $700 before she owned them. I bought a better set in great condition at a rummage sale for $25 and gave it to her so she could return the rentals. She just didn’t know that good used furniture was available used or that it didn’t make sense to pay $700 for a set that probably cost less than $300 new at the time.

To my mind it seems there is a difference between making it easy to buy a house — something that is good for the buyer most of the time — and making it easy to go into debt for a fancy stereo or video game when people are struggling to meet their more important needs. But there are areas where the balance is much less clear. Easy financing for a used car, which allows one to charge a low-income family an extra two thousand dollars and a high interest rate may seem exploitive, but it can also help them get jobs that require transportation.

I’m not saying that we need to judge the ethics of those who make it easy for customers to buy. Any given purchase may have its own unique circumstances, so it would be tough to judge in any case. Still, if we use the idea ourselves to make money, we might sometimes see when we are actually helping people and when we are just helping them into more financial troubles. At that point we each have a decision to make about how we want to do business.

Again, it isn’t always going to be clear when it is truly adding value to make it easier for a person to buy something, but there are classes of purchases where that seems more likely to be the case. They include:

  • Easy financing for homes, when the buyer has the income to afford it.
  • Easy financing for education meant to improve job prospects.
  • Easy financing for business equipment when there is a clear and reasonable plan for the business.

Essentially the ethical approach is to make it easy for customers when they are either enriching their lives or at least not making them worse. You might, for example, have a business buying used furniture and reselling it with easy terms, and in this way give those with low income a valuable alternative to the rent-to-own places and to high-priced new furniture in general. A used wooden kitchen table set that you buy for $90 and sell for ten payments of $18 (total: $180) might be every bit as functional as the same table bought new for $400 cash, or bought through a rent-to-own place for $800. In that case you have helped the buyer while making a decent profit.

Getting back to the business side of this (though I will often detour into ethics in these pages), it might seem that the general idea of buying for cash and selling for payments is only workable for those with a lot of capital. Certainly having money in the bank helps, but you can do this using credit as well, especially as a way to get started. Consider the scenario in the following example.

Suppose your friend needs a new blind-cleaning machine to expand his cleaning business. They cost $3,000, but he has no cash and his credit cards are maxed out at the moment. So you negotiate a price of $2,800 and buy the machine using your own credit card, one which charges 12% interest. Your payments will be $54 monthly. You sell the machine to your friend for $3,300, with payments of $100 monthly and 18% interest. If all goes well, you’ll make a profit of $500 on the sale, and make a couple hundred more on the difference between the 12% you pay in interest and the 18% you charge. Meanwhile your friend might add hundreds of dollars in monthly revenue to his business with the new tool. He does well and you do well.

On a larger scale, if you have the equity in your home, you might borrow $50,000 to buy and repair a small home that you then sell for $75,000. You can add value both by fixing the place up and making it easy to buy. Perhaps you sell it to a responsible young couple for $3,000 down and $500 per month, with the interest rate a couple points above what you are paying on your loan. Even if it’s only worth $70,000 as a cash sale, the couple will likely do better than renting.

Make it easy to buy things that should be bought. It’s a profitable and ethical money making strategy.

Poverty is the Problem – Not Income Inequality

The idea of poverty is often linked to income inequality, but this is misleading. By itself, it isn’t necessarily a bad thing for some to be richer than others. If, for example, everyone in a country has decent shelter and food and their basic medical needs taken care of, how could it hurt us that there are some people with millions or even billions of dollars? In fact, as economists will point out, the ability of some to make millions can help create an economy where virtually all people can meet their basic needs. Many western nations provide at least partial examples of this.

We should keep in mind that poverty is a relative term. In some countries the rising of income past $2 per day is considered the end of poverty. The poverty level in the United States, by contrast, is about $22,000 annually for a family of four, the way the government figures it. This works out to about $15 per day per person. It is hard to live on that amount here, but this poverty is nothing like that of sub-Saharan Africa.

It seems likely that whatever level of wealth a nation reaches, those with the least income will still be called poor. True poverty should have a more functional definition, rather than an income level definition. Not so long ago (around 1998 to 2001) I was living on about $8,000 per year, but I lived well, so I wasn’t poor. I had a home, food, and medical care when I needed it. I even traveled quite often. Having all the basics of life, I certainly didn’t care that there some who had millions of dollars. It didn’t hurt me in any way. In fact, since I hoped to have an above-average income at some point (as my wife and I did for several years after that), I didn’t much like the idea of wealth redistribution. Income inequality just isn’t a problem if people are well and envy isn’t running rampant.

Income Inequality

In any case, income equality can be less of a solution to real poverty than people might think. Consider a country like Haiti, where if all the income was divided equally everyone would still be making less than two dollars daily. Clearly the distribution of income is not the primary problem there. The total amount of income and wealth in the country is the issue that needs to be resolved. They need far more income before their poverty can be reduced much.

On the other hand, if there is a large gap between the rich and poor and the poor are really poor, this is a problem on several levels.

First, extreme poverty is a life threatening condition. In my mind, despite my tendency towards free-market ideas and belief in the value of (conditional) property rights, this kind of poverty justifies redistribution of wealth from rich to poor. If you think for a second about what you would do if your daughter was starving and the rich people next door were partying and enjoying a banquet — and you had the opportunity to take a bit of that food — well, then you understand the principle, which might be stated as plainly as this: Life takes precedence over property rights. And what is true on a small scale is usually true on a larger scale.

Second, as you imagine stealing your rich neighbors food to save the life of your daughter, you can see another problem inherent in income inequality when the poor are really poor: It is bad for the rich as well. In fact, when my wife and I travel to some parts of South America, I often ponder the costs of all the glass-and-metal-spike-topped walls that surround every middle class home, and the iron bars on almost every window. Somebody’s daughter is always hungry in some countries, and because of that the people have to pay for walls and other security measures.

But the costs to the middle class and rich of having extreme poverty a few steps away is more than just financial. It is common to roll up car windows when traveling in the poorest areas, for example. It is dangerous to take a walk in many areas, especially if your clothing shows that you are not poor. Wealth in the midst of that kind of poverty doesn’t buy you the easy-going lifestyle we can enjoy in many western societies.

Finally, in addition to the suffering of those who are in extreme poverty and the costs and inconvenience that this creates for the middle class and wealthy, there is a more general economic argument for alleviating poverty. It is that we may all be better off when none are extremely poor. We gain not just safer, more stable societies when we eliminate poverty, but we gain wealth as well.

How can being taxed to help the poor help the rest of us? A look at some simple examples will help explain. Consider an isolated community in the Appalachian Mountains four generations ago, or one in the Andes Mountains today. The people living there may be poor in large part because of a lack of basics we take for granted, like electricity, running water and decent roads and bridges.

If the government taxes us to provide those things for the poor there, the local economies may grow dramatically. Farm produce and other products can now be brought to market. Industries can be started because of the electricity. Under-employed people have work and can be far more productive. It is easy to imagine that in some such cases this one-time investment can yield not only great benefits for the people helped, but also future tax revenues (based on the increasing incomes) that more than repay the expenditures.

The bottom line is that there is a great benefit to all of us when all do well. The poor are a poor market for most goods and services, but when their incomes rise things can be sold to them and they can sell things, starting with their labor. All you have to do to see the logic of this is to imagine a store in a town where most are unemployed or underemployed, and a dollar-per-day is the average income. It would be hard to make a profit. Let that store represent the rest of us in the economy (in the form of businesses and their employees) and you can see why we would like those people to be making ten times as much money.

We are all wealthier in the long run when everyone can participate fully in the economy and meet their basic needs. In some parts of the world unemployment is higher than 50%. Just think how much better off the country — and all its citizens — would be if all those potential artists, store-owners, business women, and laborers were part of the economy.

Governments have a poor record of doing the right things when it comes to helping people help themselves. Unfortunately, much of what is done to alleviate poverty can also help perpetuate it (grain donations in poor countries have been known to destroy local grain farms, for example, by lowering the price below the cost of production). But this doesn’t mean that nothing good has ever been done by governments, nor does it mean that we can’t push for those policies that actually help both in the short and long term.

Income inequality does matter in countries with extreme poverty. A bit of redistribution can alleviate it not by making the rich poor, but by raising the incomes at the bottom and improving the economy as a whole. It just has to be done wisely.

A Few More Notes About Income Inequality and Redistribution

I like to remind my liberal friends that all tax revenue and law in general is accomplished by force. I do not pay taxes voluntarily, but pay because men with guns will come if I don’t (I would not support the many wars and other nonsense my money is spent on if I had the choice). With this in mind we should be very careful about what programs we advocate and about law making in general.

I like to remind my conservative friends that they too believe in “sharing the wealth,” just in different ways and degrees. None of them advocate ending public schooling or Social Security, both of which are redistribution schemes (the latter because the money paid out is taken from current taxpayers, not prior investments, which were never made). And they never seem to complain about the vast welfare programs for the wealthy and large corporations.

Finally, income inequality, while not necessarily a problem in itself, is worth looking into when it is growing more pronounced, as it currently is in the United States. You have to wonder why the economy is producing more than ever, with productivity per employee more than doubling in forty years, while those employees make less now (adjusted for inflation) than they did forty years ago, and the richest few percent are five times as rich. Much of that is tax policy, which has directly and indirectly shifted more and more of the cost of government onto the shoulders of the poor and middle class and has made it more difficult for people to increase their income through small businesses.

But that is a topic for another time. For now I will repeat my proposition that income inequality is not the same as poverty, and that the latter can be alleviated is wise ways that benefit all of us, and even reduce that inequality at the same time.

What is Your True Hourly Wage?

The particular job you choose is rarely just about the money itself. You weigh the financial benefits, but also the amount of interest you have in this or that position and the work it will involve. Perhaps you even look at who you will be working with, or the kind of boss you’ll have. The weekly or hourly wage isn’t the only thing that matters.

On the other hand, the financial rewards are still an important part of the decision for most of us, and when it comes to analyzing this part, most people are not very thorough. For example, some people just compare the annual salary or hourly wage of various jobs. And other job-seekers will over-value certain benefits in financial terms.

As an example of the latter, consider a single young woman who chooses a job that pays $3 per hour less than another one because it provides a health insurance policy for which she will contribute $40 weekly. She may not realize she is paying $2,000 per year directly for the policy, and giving up $6,000 in income ($3 less per hour times 2,000 hours). Looked at this way the total cost is $8,000. Maybe she could have taken the other job and found a decent policy on her own for $5,000, thus coming out $3,000 further ahead each year.

The more important point is that, when comparing jobs, we sometimes don’t look at what we really net. Many years ago I worked with a man who drove 63 miles each way to get to work and back home because the jobs within a mile or two of where he lived paid about $2.50 less per hour. I’m not sure about the math at that time, but I doubt he was either. At the moment, driving the truck he had then, the extra costs for gas alone would be about $105 weekly. That would eat up all of the extra $100 weekly that he made.

Let me add to this idea that we probably should consider our time to be worth something (I certainly do). This man was spending perhaps fifteen hours extra in his vehicle each week. It seems likely that he would have been better off taking a convenience store job a mile from home and perhaps putting in overtime if it was available.

So how much do you really make? In determining this, and for purposes of comparing your options, you should look at all the costs of any given job. You want to know how much money you’ll actually make versus sitting at home doing nothing. So if one job requires that you buy uniforms and maintain them at your expense, take that into account. If another lets you eat for free while at work, take into account the savings on your grocery bill.

When the math is done, you at least have a more realistic picture of the financial benefits of each option. Then you can bring the other elements into the mix, like whether you will like this one or that one more. And don’t forget to consider which one takes you closer to your goals in others ways, such as opening up future opportunities, providing training you’ll need for other pursuits, or allowing you to live where you want to.

A final note about this calculation:

I consider all of my time to be of value, and so I like to take it all into account when looking at jobs or business opportunities. I want enjoyable work, but I also aim for making the most I can for each hour worked, particularly with jobs, since I do not enjoy any of them. In the extreme this approach can present a problem. For example, even if a job paid $150 per hour it might not work for you if you could only get scheduled for two hours per week. Instead, you might prefer to work 40 hours weekly at $15 per hour.

If you really have good uses for your time other than working, you may want to arrange your life so you can take that job with the higher hourly rate. If you budget well and generally live on less than you make, you are freer to look for the maximum return for your time actually spent at work, without so much attention to how much you make in a week or year. This gets me to my formula:

M divided by H equals T

M = Total income. This is what you expect to make from a job, business, or project. This can be looked at annually or monthly, weekly, or on a project basis. Add up all measurable financial benefits in dollar terms. If an employer hands out season tickets for some sports team, and this is worth $100 to you (the normal price is not relevant to what they are worth to you), add that in. If they’re worth nothing to you, add nothing. Then subtract all costs, including taxes, uniforms, the expense of driving to work, and everything else that you wouldn’t have to spend if you didn’t have that job or business. This gives you your real net income (before taxes).

H = Total hours required. Add all time, including the time you must spend on the phone talking to your boss, and every minute spent driving to work, and all the hours at work, including unpaid lunch hours. If you are required to go to company parties, include that time too unless you really enjoy them.

T = True hourly wage. Divide your total profit by your total time and you arrive at what you really make for each hour. This is the figure you need to fairly compare your options (assuming you can get enough hours to survive with each potential job).

If you budget well and generally live on less than you make, you can choose to figure things this way, without so much attention to how much you make in a week or year. In other words, you can choose that high-hourly-wage activity that doesn’t take as many hours. By the way, if there are different tax consequences (perhaps you are comparing a business to a job), you’ll have to do the calculation using after-tax income to compare each option fairly.

If you make much more per hour, but less for the week due to shorter hours, you have more time to play with the kids, go to movies with your wife, or study archeology if that’s what you want to do. Time is the stuff of life, and the more you are paid for that part of it spent working, the shorter you can make those hours and the more time you have for what truly counts.

Of course for some people what really counts is their work. You have to take into account how much you’ll like a job. And if you happen to make a decent wage doing something you love, that’s great. It’s certainly a worthy goal to aim for.

What is Real Money?

Those who are “hard money” advocates like to refer to gold and silver as real money. They see paper currencies as false money, of course, or at least those that are not backed by gold, which includes all the currencies of developed nations now. This is a very limited view, and in the end, money is as valuable as people make it.

It’s true that the dollar was at one time backed by gold. It is also true that if a currency is fully backed by gold a government or central bank cannot manipulate the money supply so easily. Contrary to popular myth, though, this does not guarantee the value of a currency, nor are all the effects of such a system good.

For example, if a currency is based on gold, and there are major gold discoveries, the value of such “real money” would drop because of the new supply. In fact, imagine if science found a way to easily and cheaply extract the gold atoms found in sea water. We could see the supply expand by a factor of ten very quickly, thus destroying most of the value of a currency based on gold.

Furthermore, an expansion of the money supply is difficult when it is limited by the gold a government or central bank holds. This may at first glance appear to be a good thing, but it isn’t necessarily so. Economies expand as more real goods are created, and if the money supply doesn’t also expand, the prices of everything drop over time. Some people might like this, but not owners of real estate and other assets. In fact, prices did drop for decades in the late 1800’s, exactly because the money supply could not be easily expanded when based on metals. As you can imagine, there would be some problems getting loans on homes and land if their values were always falling.

Is Paper Money Just a Confidence Game?

It is commonly said that paper money or “fiat currency” only maintains its value as long as people have faith in it. That sounds very precarious as a system. On the other hand, the same can be said of gold or silver. After all, you cannot eat them, and few people have personal uses for these metals other than as investments. In fact, although both metals have real uses in industry, and so have some real value beyond just monetary, much of the nominal value they have is only because of the faith people have in them. Take away the investor demand for gold and the price would plummet, even though it would still have its industrial uses (silver is actually more useful and so the price doesn’t rely as much on investor demand).

Now, it’s true that as a perceived value, gold has done better historically than most currencies. We have much more confidence that others will want our gold in the future than in others wanting our dollars or pesos or rubles. But this does not mean that paper currencies are destined to fail, even if most do.

Consider our current situation. As the Federal Reserve monetizes the government debt, effectively creating more money than ever in history, we are likely to see inflation eat up the value of the dollar. On the other hand, this is a choice, and is not inevitable. They could choose to be responsible, or future laws could prevent such irresponsibility. And if the supply of money is grown at a reasonable rate (in line with economic expansion), we have no real reason to think that the dollar would become valueless just because it isn’t backed by precious metals or anything else physical.

Part of what keeps the value of a currency intact is the web of contracts denominated in that currency. You can’t pay your mortgage payments in anything but dollars, so you have to get some. The same is true for your other debts, and for the agreements among businesses. The trillions in contracts that are denominated in a currency assure some demand for that currency. Add to this the fact that by law you have to pay taxes in dollars, and you can see that even though you can talk all day about how our money is just worthless paper, you still want some.

Real money is whatever people readily accept in exchange for real goods. And although a currency backed by gold might seem much safer and less prone to the manipulations of an irresponsible government, such irresponsibility makes any money suspect. After all, how would we know if the gold was really there? With or without precious metals or other things backing it, a responsible government could maintain the value of any paper currency if it decided to. That responsibility is what makes a sound currency, not the gold or silver promised for the bills.